• Woodside Village Revisited: Florida Legislature Restores Condominium Leasing Rights
  • December 19, 2005
  • Law Firm: Hodgson Russ LLP - Boca Raton Office
  • Imagine you just bought a race horse. Not just any race horse -- Seabiscuit. What do you do with the greatest race horse of all time? You race him, and you earn lots of money. But wait, now the National Thoroughbred Racing Association, of which you are a member, has voted to change its rules. They tell you that you may continue to ride Seabiscuit all you want and enjoy his company; you just can't race him for money. And if you try to disobey, they have the statutory right to take your horse. So now you're left with an extremely expensive mode of recreational transportation.

    Sounds like a farfetched idea? Maybe, but it's not all that different from the scenario that until recently condominium owners in Florida faced. Under a 2002 Florida Supreme Court decision, Woodside Village Condominium Association, Inc. vs. Adolph S. Jahren and Gary M. McClernan, a condominium association was allowed to do to its unit owners what the racing association in the above example did to its members. By a vote of the association membership, the association amended its governing document, the Declaration of Condominium, to effectively ban the leasing of any units in the condominium.

    The problem with this action by the association was that Mr. Jahren and Mr. McClernan were then leasing out a number of units they each owned. After the passage of the amendment, the association sued these owners for violation of the new restriction against leasing. The two owners claimed the leasing prohibition restriction should not apply to them, as the declaration did not prohibit leasing at the time they each bought their units. They asserted the application of the restriction against them would greatly diminish the value of their units. Trial and lower appellate courts agreed with the owners, finding that the application of the restriction to owners whose units were not subject to a leasing prohibition at the time of acquisition was inequitable with respect to owners who had bought with the expectation that leasing would be allowed.

    However, The Florida Supreme Court disagreed with the lower courts, finding that when a condominium owner purchases property that is subject to a Declaration of Condominium, the owner is aware that such declaration may be amended. In essence, Mr. Jahren and Mr. McClernan knew full well that, even though leasing was not prohibited at the time of purchase, the declaration could be amended at any time to provide such a prohibition. (For a more detailed analysis of the Woodside Village decision, please refer to the 2003 edition of the Edge; e-mail [email protected] for a complimentary copy.)

    After the Woodside Village decision, absentee condominium owners throughout Florida became very nervous about their investments, and rightfully so. What protection did they have from similar restrictions in their own communities? While the Supreme Court did address the issue of the potential loss of investment value by owners, the owners lamented that they were bound by the confines of the Florida Condominium Act. Therefore, the Court put out a straightforward invitation for the Florida Legislature to correct the situation, stating that "although we believe such concerns [with respect to the removal of a unit owner's lease rights] are not without merit, we are constrained by the view that they are better addressed by the legislature."

    The Florida legislature took up the court's invitation in the form of a recent amendment to the Condominium Act that reads as follows: "Any amendment restricting owners' rights relating to the rental of units applies only to unit owners who consent to the amendment and unit owners who purchase their units after the effective date of that amendment."

    In essence, the legislature overruled the Florida Supreme Court's decision in Woodside Village by providing protection for owners who bought prior to the date the association instituted leasing restrictions. There is one caveat: Any pre-existing owner who votes in favor of the leasing restriction will be bound by the restriction.

    If you presently own a condominium in Florida and the governing documents are amended in the future to prohibit leasing, you can rest assured that you will still have the right to lease out your unit, whether or not you are leasing it out at the time of the amendment. However, if you vote for the restriction, then you can be prevented from leasing out the unit in the future. You should still review all condominium documents prior to purchasing a unit to fully understand any restrictions that may be put on leases, such as association approval, term limitations, and review and approval fees, as well as any other conditions that may affect your ownership and enjoyment rights.

    So now it's off to the races for Florida's condo owners!